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Economics, Politics, Legalities, Ethics and Sociology of Pyramid Schemes / Multi-level Marketing.
The Florida-based MLM, Own My Travel, Sued by SEC for Operating a Pyramid Scheme
The scheme claimed it is a typical MLM and that it offers a product discounted travel services and was not paying people for recruiting. The SEC claims that the scheme merely is charging membership fees and then transferring portions of the fees from later investors to earlier ones. It also claims that the company made false and misleading claims about income, the background of the owners (the owner had run a similar scheme, called the Winners Circle, that was virtually identical and had gone bankrupt), the financial stability of the company and the pyramid nature of the business.
The SEC stated that:
-- Own My Travel is a fraudulent pyramid scheme that depends on recruiting new investors to function, and which, by definition, is going to fail and leave investors with substantial losses. There is a finite number of prospective investors who could choose to invest, and when there are no more, OMT has to collapse.
-- The travel club merely masks what OMT is really selling: securities in the form of the Passport membership investment contracts to receive income from simply investing.
-- OMT's travel club benefits are of negligible value. At least one investor found its travel prices higher than its competitors.
Some readers, especially those in Canada, may notice the stark similarity to a scheme that is sweeping through Canada called Business in Motion (BIM). In that scheme, members buy memberships in a discount travel program; are told they don't have to sell; are promised life time income; and can buy multiple memberships. Income is gained as new members join.
The CBC News show, Marketplace, did a commendable exposé of the scheme and complaints about it have come into the news and to the Canadian Competition Bureau. Yet, the scheme continues to operate and thousands of Canadian consumers are lured in, believing it to be a viable and legal income opportunity. In that scheme, also, the "product" was shown in the news program to be worthless since better travel discounts were found easily on the internet for free.
Canada has proven to be North America's haven for pyramid scams, while the US is the creator and developer of various new forms and disguises for them.
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